The union petroleum ministry has budgeted for 2.3 million tonnes of equity oil from abroad in the Ninth Plan. The Oil & Natural Gas Corporation (ONGC) subsidiary has projects on hand in Vietnam, Iraq, Azerbaijan and Kazakstan, which together require Rs 1,200 crore of investments over the next three years.

Exploration companies rarely rely on borrowings, as bank finance is hard to come by for high-risk ventures like oil and gas explorations. Usually, only one out of every six wells drilled yield hydrocarbon reserves. Even so, investment banks like Morgan Stanley, Natwest of London or Japan's Samsong are known to provide high-interest loans for developing discovered property.

Prospecting and exploration forminerals are almost always funded out of the earnings of cash-rich mineral producers. ONGC Videsh, which posted a profit of Rs 2.18 crore last year, after breaking even in 1996-97, is yet to join the ranks of the rich, since none of its oil or gas finds have gone on stream yet.

The company's first gas field will begin production in 2001, and till then, ONGC Videsh will have to beg or borrow funds for its ongoing ventures. During the current fiscal alone, the company will have to spend Rs 400 crore on projects on hand, including the Vietnam gas field.

ONGC, which has budgeted a spending of Rs 400 crore on overseas exploration during the Ninth Plan, could be one source of funds for its subsidiary. The national oil exploration and production (E & P) company, however, had set aside the same amount for exploration abroad during the Eighth Plan, but the funds remained unutilised.

A second option for ONGC Videsh could be another loan from OIDB, which collects cess from oil companies with the intention ofploughing it back for their development. The third option, procuring high-interest loans from global investment banks would, apart from being impractical for a company that has no earnings, may prove impossible, assuming that the country's sovereign rating will rub off on national oil companies as well.

The million-dollar question now is: whether the OIDB is willing to increase its exposure to ONGC Videsh. The company already owes Rs 76.7 crore to the development bank and paid Rs 7.3 crore as interest last year.

In 1989, an empowered committee had approved an expenditure of $150 million for overseas oil exploration. So far, ONGC Videsh has spent $ 50 million in hunting for hydrocarbon reserves abroad.

The union cabinet has, in recent years, also emphasised the need to locate and acquire overseas sources of crude oil and gas, since the home reserves are limited and fast depleting. The effectiveness of the policy thrust will now depend on nitty gritties like whether or not a national oil company is ableto raise resources for such ambitious ventures.